Frontier Markets: The next big deal...

The latest Grant Thornton 2012 Global Private Equity Report says that India and China face serious competition from their South East Asian neighbours in attracting investments. Indonesia, Peru, Colombia and Turkey top the list of new 'high growth' markets where private equity is likely to see the most opportunities.

Top 10 new "high growth" markets

1	Indonesia
2	Peru
3	Colombia
4	Turkey
5	Myanmar
6	Egypt
7	Saudi Arabia
8	Mexico
9	Ghana
10	Malaysia
Source: Global Private Equity Report 2012, Grant Thornton

According to the report, the search for growth is making local private equity firms keep a watchful eye on where tomorrow's deal flow will originate, particularly as some of their home markets show signs of overheating. Between July and September 2012, Grant Thornton conducted 143 interviews with executives from private equity firms in Western Europe, North America, BRICS, Asia Pacific and MENA.Many private equity executives expect both China and India to suffer a decline in deal activity in the next 12 months. This does not bode well for India, which is grappling with muted exits, declining internal rate of return, a dipping currency and policy paralysis. Earlier this year, a report by Emerging Markets Private Equity Asia stated that in 2011, India managed to raise just $2.73 billion in private equity funding, compared to $3.26 billion in 2010.The turnaround in sentiment has been dramatic for both India and China. Last year, 78 per cent of the respondents expected investment activity in India to increase, while the remaining 22 per cent expected it to remain steady. This year, 45 per cent expect it to decline. On the other hand, 78 per cent of the respondents expect new-deal activity in Latin America to increase. While this represents a slight dampening from last year's 89 per cent, the broad sentiment for the region is still very positive. No surprises here, with Brazil raising an impressive $7 billion in 2011.

Expected investment activity by region

Region	Increase	Stay the same	Decrease
Asia Pacific	50%	44%	6%
China	33%	11%	56%
India	33%	22%	45%
Latin America	78%	22%	0%
Middle East & North Africa	60%	33%	7%
North America	59%	41%	0%
Western Europe	27%	64%	9%
Source: Global Private Equity Report 2012, Grant Thornton